Hermès holds up while luxury goes sideways
While Birkins power Hermès to new highs, investors are left wondering what exactly “solid” means at LVMH
In this week’s Dark Luxury news round-up
Hermès defies the downturn while LVMH and Kering continue stumbling
A luxury holding company says the words you never want to hear in finance
Investors pile hundreds of millions into a fast fashion giant that markets itself as “luxury”
One luxury executive’s “Pollyanna” view of the industry
Are Chinese shoppers fuelling luxury’s “vibe shift”?
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Hermes sales jump, as expected
Hermès continues to defy the luxury downturn and has reported a nine per cent rise in quarterly sales, reporting “solid sales” in its half-year statement. The brand’s famous Birkin, Kelly and Constance bags have shielded Hermès from the decline in interest in luxury leather goods. The high demand and pricing power of those products can be seen in the healthy secondary market for those bags, and even in the cherry-on-top that is the $10.1 million sale of the so-called “original” Birkin bag a couple of weeks ago. The buyer of that bag was a Japanese resale platform, and sales in Asia and Japan are holding firm. “I don't see any fundamental changes in the sales climate in China at the moment”, said CEO Axel Dumas in the statement. Hermès makes 54 per cent of its sales in Asia including Japan. Not everything is peachy at the firm. Beauty and watches saw declines of over seven per cent and five per cent, respectively. (Reuters)
Eric Freymond, a former advisor to Hermès heir Nicolas Puech, has died at 67, as a mystery related to the disappearance of €14 billion worth of shares in the business remains unsolved. The pair’s decades-long relationship ended in scandal in 2022 after Puech accused Freymond of playing a role in the shares’ disappearance. A Geneva court found no wrongdoing on the part of Freymond, but the missing fortune – which would make Puech the single largest shareholder in the firm – remains unaccounted for. (Bloomberg News)
LVMH reports poor sales, as expected
The much-previewed poor performance in LVMH has arrived, with the luxury conglomerate reporting that its fashion and leather goods segments fell four per cent in the first quarter and 12 per cent in the second, leaving it down eight per cent overall for the first half of the year. The company tried to put a positive spin on the news, its website declaring that they were “solid results”. (Forbes)
One of the threads to this story is that LVMH is considering selling off some of its poorly performing maisons, and Marc Jacobs is apparently among them, reports Lauren Thomas in her Wall Street Journal exclusive. (WSJ)
Kering and Gucci report poor sales, also as expected
Sales at Gucci tumbled by 25 per cent in the second quarter compared with the same period last year, according to Kering’s statement last night after the market closed. This matched analyst estimates, leading to a four per cent rise in the share price at the time of writing. Kering’s shares are up nearly 15 per cent since the announcement that former Renault executive Luca de Meo would be taking over as CEO, but are still down six per cent since the start of the year. Deputy CEO Jean-Marc Duplaix told analysts that de Meo will present his vision for Kering to analysts next year. (Bloomberg News)
Mimma Viglezio takes us inside Bernard Arnault's business empire and tells us why she left for Kering, one of the most senior people ever to defect from LVMH to its arch-rival. Paid subscribers can read our two-part interview series:
L’Informe previously reported on the sticky questions of new Kering CEO Luca de Meo’s time at Renault, and now they’ve published part two of the series. Renault is reportedly dismantling de Meo’s signature project, Ampere, the electric-car and software spin-off once pitched as a “French Tesla”, which is likely to be folded back into the parent company. The plan, initially meant to turbocharge Renault’s valuation and innovation credentials, was plagued by internal resistance, spiraling costs and a failed IPO, with insiders questioning whether de Meo's push was more about optics and bonuses than viable strategy. Renault has since appointed François Provost as his replacement at Renault, reportedly a key ally of de Meo at the group. (L’Informe)
“We have no liquidity problems”, is not a sentence you want to read from anyone who manages a lot of money and leverage, but those are the words in a statement released yesterday by Artemis, the Pinault family company which controls Kering. We recommend this Miss Tweed story to understand the context. (Reuters via LVMH short seller/Kering long buyer Intern Pierre)
Paid subscribers can read about how anonymous short-seller Intern Pierre decides which luxury brands are on the way down
Luxury’s ‘vibe shift’?
Carol Ryan describes what the headline writers at the Wall Street Journal call a worrying “vibe shift” in luxury, as sales dip at major leather goods and luxury fashion brands and consumers switch to products which offer better value for money, such as jewellery. UBS analysts said “investors are starting to worry about the long-term structural attractiveness of the industry”, and Ryan writes that Gen Z customers appear more concerned with the repeated discoveries of abuse in the industry’s supply chains, and “extreme price markups”. (WSJ)
A trade deal no-one really wants
“I’m pushing as much as I can for us to reach an agreement with the Americans, so that we don’t get caught up in a trade war”, LVMH CEO Bernard Arnault said in an interview with the Wall Street Journal. He reportedly has been busy shuttling between European leaders to try and get that trade deal across the line, which has avoided the threatened 30 per cent tariff rate and an escalating trade war, although 15 per cent is still pretty awful for brands who sell to wealthy Americans. It also leaves some important luxury sectors such as champagne and spirits in limbo as France pushes for more carve-outs in the deal. European business leaders have described it as the “least bad outcome”, which is certainly no reason to be popping corks. (WSJ)
The trade war that wasn’t has hit some European firms more than others. Mercedes reports that it expects “significantly lower” full-year sales on top of slow Chinese demand, and its profits have halved. Porsche also lowered its annual forecast on Wednesday as a result of a €400 million hit from US tariffs. (FT)
Behind the vibe shift
Made-in-China luxury continues to captivate Chinese consumers, as white gold jewellery brand Laopu’s stock price has surged by more than 2,000 per cent (not a typo) since their listing just over a year ago. The Wall Street Journal reports Chinese customers are queueing in long lines for brands such as Laopu, Mao Geping and Songmont, with social media buzz adding to the craze for these brands. (WSJ) The brand’s items focus on nationalistic – Richemont chair Johann Rupert said the brand is “tied to nationalism and patriotism” – designs featuring ancient coin pendants and lotus patterns. Some froth has come out of the price of Laopu in the last couple of months, and they’ve since fallen to their lowest level since 20 May. (CNBC)
“Businesses complain they can’t find workers these days, but why should anyone be available to work full-time in a hot environment, often with no windows, for little money?”, says Brunello Cucinelli in his cold white wine-showered lunch with the FT. He described the latest downshift in the luxury industry as “inevitable” following a period where it has “profited excessively” in recent years. The Italian blames the French for the “booming” profit margins and recent stories about abuse in supply chains. He says, “you can only do that if you subcontract production to Chinese firms that have the capacity to make thousands of handbags and charge €50 a piece . . . But then it ends up in the media and our rich clients feel fooled and stop buying . . . Can you blame them?” Milan correspondent Silvia Sciorilli Borrelli mentions that Cucinelli’s critics call his “penchant for ethics” a marketing strategy, and she appears to be unconvinced by what she calls his “Pollyanna” view of the luxury industry. Whatever you think about the man, it’s a delicious read. (FT)
The role luxury brands play in supply chain labour scandals
Can luxury ever guarantee clean supply chains, asks Sophie Benson in Vogue Business. The piece somewhat buries the lede in that many of the people she spoke to point the blame at brands for poor transparency, unfair pricing, and unrealistic lead times, which contributes to labour scandals that we’ve heard about in recent years. New Italian legislation could also include exempting brands from being held to be responsible for “illicit or opaque behaviour” by suppliers and subcontractors, in exchange for ad-hoc preventative checks. Her story also looks at the broken auditing system, where brands send their own inspectors to the same locations, which duplicates work and increases bureaucracy. “One brand was telling me how they have over 4,000 suppliers, and every year they can only audit about 1,500,” said Ettore Piacenza, the director of one Italian supplier of fleeces and fabrics to tailoring and haute couture. (Vogue Business)
A significant ruling in a French court has sided with Rolex, finding that luxury trunkmaker Pinel & Pinel unlawfully exploited Rolex’s brand codes through its watch winders. Though Rolex doesn’t sell winders itself, the court held that the use of abbreviations like “GMT” and “SUB” amounted to parasitic behaviour. The decision signals that even adjacent product makers can be liable for trading on luxury brand prestige without adding creative value. (The Fashion Law)
The lack of information following The Platform’s Maria Silvia Sacchi’s reporting that Valentino CEO Jacopo Venturini has been on medical leave has been followed up by silence from the brand, which has reportedly “created considerable unrest” inside the fashion house… will everyone go on holiday without knowing what they’ll find upon their return?”, she asks. (The Platform)
The Sun has published a sensationalist story alleging that asylum seekers housed in taxpayer-funded hotels are playing a part in a “shoplifting spree” targeting stores which sell luxury items, such as Liberty and John Lewis. The headline says, “Taking a Liberty… & Gucci, Prada, John Lewis”. Based on a single anonymous security source, the article alleges 70 per cent of West End shoplifters are asylum seekers. This directly contradicts what we’ve heard in our own reporting on shoplifting. The story does at least once again show the obligations that retailers have to tackle this problem openly, rather than trying to cover up the details. (The Sun on YouTube)
Dark Luxury’s investigation reveals rampant criminality on the London shop floor at Selfridge – including discovery of a loaded gun – with little action taken by management
Can Botswana take control of diamond giant De Beers? (FT)
Skims’ first beauty product is a “face wrap” for $48 which sculpts your jaw overnight. (BoF)
Quince, the direct-to-consumer “luxury” brand, just raised $200 million at a $4.5 billion valuation. The brand markets itself as the “opposite of disposable fast fashion,” but its model tells a different story. It offers direct shipping from Chinese factories, use of duty-free de minimis loopholes and selective information about its materials online. Here are some reddit users complaining that products labelled as 100% wool actually come with polyester linings. “Quince’s approach is cost-effective thanks to the de minimis exemption”, reported Wirecutter journalist Annemarie Conte in April. For all the talk of “affordable luxury,” we feel it has a Shein and Temu-style supply chain with better branding. (Bloomberg News)
Talking of de minimis, Ed Conway got inside the jumbo jets which supply the UK’s fast fashion demand for £2 T-shirts which avoid all duties. The trade has reached £5.9 billion and is rising by 53 per cent a year, according to his FOI request. (Ed Conway on X)
The show notes at fashion shows may be discarded as soon as the show ends, but the story of the Kolhapuri sandals scandal shows why they really matter. The failure by Prada to reference the origin of its Milan fashion week design has resulted in an embarrassing publicised visit by “a team of experts” from Prada visiting Kolhapur in Maharashtra to meet local makers of the famous sandal. “In its show notes, Prada had described the footwear as “leather sandals”, with no reference to an Indian connection, evoking outrage from many in India’s fashion community as well as traditional makers of Kolhapuri chappals in western Maharashtra”. (The Print)
Africa is the “new frontier for ultra-luxury tourism”, according to Bloomberg News, which reveals that nearly 85 per cent of the continents’ hotels are upscale, upper upscale or luxury developments. (Bloomberg News)
The news round-up is taking a break
Fashion Magazine, one of our favourite news sources, is taking a break for the summer holidays. The Dark Luxury weekly news round-up (the email you are reading at this very moment) will also be taking a break for a couple of weeks until it returns on 20 August, but we’ll continue to publish our weekly stories for paid subscribers at the end of the week as usual. (Fashion Magazine)
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